Collective redundancy

Where 20 or more employees are to be made redundant (i.e. dismissed for a reason not related to the individual concerned) within 90 days in the same place there must be a ‘collective consultation.’ Redundancy situations which will count towards this figures may include:

– Where a fixed term employment is not renewed after it expires.

The consultation must be carried out with the body (or person) representing those employees who are affected. This may be a trade union or existing employee representatives (such as a staff forum), where the affected employees have give the representatives authority with respect to being informed and consulted about potential redundancies. Where no such group exists, an employer should arrange for one to be elected. Affected employees will include those employees who are at risk of redundancy, as well as those who are not but who will be affected by the changes to the company after redundancy (changes to workload etc).

In a situation where 20 – 99 employees are to be made redundant within this time frame, in the same place, consultation must take place at least 30 days before the first redundancy dismissal is effective (i.e. where a notice is given of the contract termination).’

In a situation where more than 100 employees in the same place are to be made redundant within 90 days, the consultation requirement is 90 days.

Under the Trade Union and Labour Relations (Consolidation) Act 1992, an employer proposing to make redundancies should notify the Department for Business Innovation and Skills, as well as the representatives of any trade unions or employee representatives of the proposed redundancies.

When handling a consultation, an employer must:

– Stick to the period required for the initial number of redundancies proposed. For example where the initial number of redundancies is 110 but this figure is then reduced to 98, the consultation period will not change from that required at the beginning when the initial figure was announced – even though the figure has dipped below the threshold for the 90 days consultation. The consultation period can only be reduced where the trade union or employee representative agrees.

– Disclose in writing the number and type of the employees to be dismissed and the total number of employees that could fall within the description of the type in the company; state the reason for the proposed redundancy and the chosen process for selecting employees for dismissal and carrying out the dismissal (within settled procedures and time periods); and state how redundancy payments and statutory redundancy payments will be calculated.

– Look at ways of avoiding redundancy, such as offering voluntary redundancy, stopping any recruitment to the business, retraining potentially redundant staff to do work that is available, offering early retirement or cutting the numbers of temporary staff.

– Talk about how to reduce the negative impact of the redundancies – for example giving potentially redundant staff help in finding another job, time off to look for another job, looking at how redundancy payments should be treated in terms of tax and whether employees should have to work their notice periods.

– Carry out the consultation before issuing notices of dismissal. Where notices are sent out before or during the process, this may mean employees have a claim against the employer for failure to consult. Even where there is some urgency, the consultation must be genuine, with time allowed for the representatives to consider the redundancy proposals – it should not be a ‘sham redundancy.’ Other than this, the dismissal notice can be served at any time, provided there is the opportunity for employees to serve out the notice period or receive a payment in lieu of it.

In a redundancy situation there is also a requirement for an employer to notify the Department for Business Innovation and Skills where there are 100 or more employees proposed for redundancy in a period of 90 days from the same place – this should be done at least 90 days before the first dismissals happen, or an employer could face a fine or conviction.

An employer is obliged to consult about certain specific issues related to reducing the effects of a redundancy, for example how to avoid making the redundancies, reducing the number of redundancies and lessening the effects of the consequences of the redundancies. Employee representatives should also be brought in on, and have a say in, the redundancy selection criteria and redeployment systems.

Where an entire business in one establishment is closing there is little scope for the reasons and numbers of redundancies to be challenged by those affected. However, where numbers are being reduced, the consultation process can provide an opportunity to suggest substitutes to making the redundancies – for example avoiding the redundancies by a certain number of staff agreeing to go part time or accept a pay freeze or cut.

An employer who does not follow the process for consultation and provision of information may find themselves in a position where they are required to make a ‘protective award’ to each redundant employee. This could amount to up to 90 days gross pay, unless there are any reasons that would justify a reduction in this figure, such as how seriously the employer has breached the legislation. There is no limit set on the amount of daily pay used in the calculation of a protective award. These measures are intended to reprimand employers that don’t follow the consultation requirements. There is no compensation for employee financial loss and other compensation payments should not be set off against a protective award. Only in the case of special circumstances that made it reasonably impractical for there to be a consultation will an employer have a defence to not consulting.

A claim for a protective award is made through an Employment Tribunal by the trade union or the employee representatives that have been elected (or by the individual employees where neither a trade union or employee representative is in place). It should be made within three months less one day of the date on which the last dismissal is due to happen.

A protective award (up to eight weeks) may be recoverable from the National Insurance Fund if an employer enters insolvency.

Other issues arising in a redundancy situation include those where an employee may have a claim for discrimination, unfair dismissal or whistleblowing as a result of the redundancy process. These claims are made to an Employment Tribunal within three months less one day of the conduct that is the subject of the claim (for example the dismissal).

The Transfer of Undertakings (Protection of Employment Regulations 2006 (TUPE) Regulations apply in a situation where there is a sale of a business (or part of it), or a transfer of service provision and bring extra consultation and information rights into the equation. Consultation with trade unions or employee representatives is required with respect to any affected employees – those who may be made redundant or affected as a result of the transfer or attached measures. Such rights often operative alongside collective redundancies as the latter tend to result from mergers.